Kristina Fox
If you are part of Generation Z, aged roughly between nine and 24, you could be considered a disruptive force in today’s society. Some will characterise you as having an eco-friendly lifestyle and a heightened concern for social and racial equality, and by others as having a propensity to worry about your future financial stability. But how are these priorities and concerns reflected in your own personal finance decisions?
Below we explore what it means to be in Gen Z; who you are, what you worry about and how you manage your money and make financial decisions.
Who is Gen Z?
While opinions differ, the term Generation Z generally describes those born in the run-up to the millennium up to around 2012, making the cohort in the nine-to-24 age bracket currently.
Also known as the ‘zoomer’ generation, you will have never known a world without access to technology and the internet.
You can access news and culture from across the world in an instant – distance and borders are no longer a barrier. This openness may carry through into your thinking, as you are often seen as the most accepting and open-minded generation yet.
What is Gen Z worried about?
Growing up in a rapidly changing world, life is fast paced. It is unsurprising that Generation Z is keen to keep up with new developments, whether technological, financial, environmental or societal. With these developments, however, come concerns. Here, we detail some of your most pressing worries and how these might affect your personal finance decisions.
Racial equality
Racial equality is one of Gen Z’s main priorities, and diversity matters to you, according to Ipsos research in 2017. You see the positive impact of diversity and feel that gender and racial equality are important. Aware of the inequalities and injustices in today’s society, you want to be involved in eliminating them.
The environment
Alongside a push for equality, you are likely to be concerned about climate change and its impact on our world. A 2019 survey by Amnesty International found that climate change was regarded as the most pressing world issue among Gen Zers. The effects of our industrialised society, mass production and throw-away culture weigh heavily on Gen Zers who feel the burden to take action, not least because you will be the ones to bear the biggest brunt.
Efforts from young activists show Gen Z’s desire for government action to help battle the climate crisis. At the COP26 summit in Glasgow in November 2021, Swedish environmental activist Greta Thunberg gathered alongside others to petition the UN to treat climate change with the same gravity as the coronavirus pandemic. It is clear that young people want truth, answers and actions.
Gen Z’s worries about climate change translate into an interest in companies’ ethical and environmental policies, which is likely to have an impact on your choices when it comes to how you spend and save your money.
Economic stability
Continued uncertainty surrounding Covid-19 has led to people generally craving financial stability, with a study from UK Parliament’s Research Briefings reporting that many UK households planned to keep extra savings from lockdown in the bank to ‘future-proof’ their finances.
Covid-19 will also have an impact on your financial worries and hopes for the future. Alongside millennials, your generation faces the most uncertainty and financial vulnerability as a result of the pandemic.
The Financial Times reported in April how there is “widespread financial anguish among Generation Z and millennials”, with both groups seeing large increases in financial vulnerability during the coronavirus pandemic.
If you are a student whose education has suffered as a result of the pandemic, it could arguably have a negative impact on your future earnings, affecting your long-term career plans and potentially exposing you to less stable financial outcomes for years to come.
Perhaps this increased sense of vulnerability may explain why young people desire economic change following the pandemic. In a report in 2020 from accountancy firm EY about Gen Z’s recovery from Covid-19, participants from around the world demanded a focus on people over profit and equal access to financial services regardless of background.
Having lived through so much change, Gen Zers are seen by many as ‘disruptive’ to traditional policies, not least in their personal finance decisions. For example, young people may opt for challenger banks over high street banks, with 54% of the 18-24 age group prepared to have a digital-only bank, according to NerdWallet research into ‘faceless banking’. And it seems that this desire for change stretches further into the finance world.
What drives Gen Z’s financial decisions?
So will Gen Z’s worries continue to underpin their financial decisions as they come of age? From choosing to use pocket money ‘ethically’ to deciding where to have your first proper current account when you leave university, it certainly seems that many Gen Zers want to marry up their financial worries with their ethical concerns.
It seems that, as a Gen Zer, you are willing to let your values and beliefs drive your financial decisions, both every day and in the long term.
According to a study in 2020 by First Insight, Inc., 73% of Gen Z respondents would pay more for environmentally-friendly products – a rate unmatched by any other generation surveyed. What is more, 62% “demanded sustainable retail”, according to the same study.
It seems that your desire for eco-friendly lifestyles is matched not only by what you buy and how much you pay for it, but also by which sites you use to achieve this. The secondhand market is flourishing among Gen Z – 90% of fashion marketplace app Depop’s 30 million active users are under the age of 26.
Gen Z doesn’t just differ from other generations in terms of spending habits, but in longer-term saving choices too. In a survey conducted by HSBC in 2019, 72% of Gen Z’ers surveyed said that they would take £1,000 and save it, given the opportunity, compared to 55% of millennials, suggesting that financial stability is key for Gen Z.
But the problem comes in finding out the ways of saving most suited to your individual needs. If you’re part of Gen Z, you may be more likely to turn to social media platforms and influencers to learn how to make decisions about your money. So prominent is this trend that, in March 2021, the Financial Conduct Authority (FCA) warned that younger investors were taking bigger financial risks as a result of platforms such as TikTok, where videos under the hashtag #genzfinance have over 8.3 million views.
» MORE: Is Gen Z relying on influencers for financial advice?
What’s more, if you’re in your teens and early 20s, you may be more likely to consider new ways to invest your money which did not exist for previous generations.
Indeed, research commissioned by NerdWallet in September 2021 suggests that Generation Z is interested in investing, but might be shunning traditional pension funds for newer opportunities. Almost a third (31%) of 18- to 24-year-olds would choose cryptocurrency investment over saving into a pension, despite crypto being extremely volatile and unregulated in the UK.
However, cryptocurrency arguably contradicts Gen Z’s climate concerns. Bitcoin, for example, has a huge environmental impact – mining Bitcoin uses more energy per year than Switzerland and Singapore combined, according to the Cambridge Centre for Alternative Finance. But figuring out whether there is a way to invest in cryptocurrency while remaining eco-friendly might be Gen Z’s new challenge.
» MORE: How to invest in cryptocurrency
More generally, too, there has been an increase in people interested in ‘green’ banking and investments. For example, Triodos Bank, which focuses on marketing sustainable financial products, increased its customer base in the UK by 20% during 2020, most of which was new personal customers.
Ethical and sustainable investments have also become more popular in recent years, alongside ethical pension portfolios, as people start to question where their money is going when it is invested. Gen Z may well follow this trend, bearing in mind their tendency for belief-driven decisions, but only time will tell.
4 tips to improve your financial knowhow
Some people might say that Gen Z lacks financial literacy. If you feel lost with where to start with finance, try these tips:
- Learn the basics of budgeting.
- Manage money from a young age with pocket money apps.
- Learn how to save money or create an emergency fund.
- Learn how to improve your credit score.
WARNING: We cannot tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in.
Image source: Getty Images
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